Morgan Stanley Weighs How Flipkart Changes Walmart's Global Stand Against Amazon

Walmart Inc WMT announced last week it’s pursuing a 77-percent stake in the Indian e-commerce company Flipkart.

The resulting exposure to the Indian market would heighten global competition with Amazon.com, Inc. AMZN — a steady presence in southern Asia.

The Rating

Morgan Stanley's Simeon Gutman and three other analysts maintained an Equal-Weight rating and $99 price target on Wal-Mart and an Overweight rating and $1,700 price target on Amazon.

The Thesis

The analysts consider the potential for a Flipkart IPO a “key buffer” for Walmart.

”[The] importance of demonstrating progress in Walmart’s U.S. business (particularly e-commerce) has magnified and cannot be understated,” the analysts said in a report. 

Morgan Stanley is ambivalent as to whether Walmart needs a presence in India.

The nation’s $21 billion in e-commerce sales represents just 1 percent of the global addressable market, although Morgan Stanley expects expansion to $200 billion — 12 percent of the worldwide total ― by 2026.

“India represents a significant long-term opportunity,” the analysts said.

They estimate Flipkart controls nearly double the share of online gross merchandise volume that Amazon does and is in a period of sustained growth. Its leadership in online smartphone sales is particularly notable considering the category accounts for about half of India’s total online sales, although smartphones yield low to negative gross margins.

Price Action

Amazon was up 0.29 percent Monday morning, while Walmart was trading higher by 1.16 percent. 

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